Why aggressive intervention may do little to save Argentina's peso

Why aggressive intervention may do little to save Argentina's peso

Michelle Zhu
03/09/18, 11:56 am

SINGAPORE (Sept 3): Fund managers are worrying that the worst has yet to come in Argentina’s peso crisis as big names in the bond market continue to take a beating, according to the Financial Times.   

Based on FT calculations, funds of Franklin Templeton have lost US$1.23 billion ($1.7 billion) on just three of its biggest Argentine positions over the past two weeks.

The US investment group’s “bond king” Michael Hasenstab was reported to have seen his flagship US$36.8 billion Global Bond Fund lose 4.2% in August, and his US$5.4 billion Global Total Return Fund dropping 4.3%.

Argentina’s central bank last week hiked the benchmark interest to 60%, the highest in the world, in a bid to shore up its peso as the currency lost over half its value this year.

Much of the collapse has been attributed to Argentina’s request for the International Monetary Fund (IMF) to expedite the release of a US$50 billion loan.

See: Turkey-led emerging markets rout won't end as well as the Asian financial crisis

But even the country’s dramatic measures of pushing up its interest rate may not be enough to pique investor interest, suggests Edwin Gutierrez, head of EM sovereign debt at Aberdeen Standard Investments.

“This is not a benign world and the willingness of foreign investors to finance Argentina is minimal considering most of us are long… It’s very difficult to find a marginal buyer,” said Gutierrez to FT.

Lukman Otunuga, research analyst at FXTM, believes the near-term outlook for emerging market (EM) currencies including Argentinian peso remains cloudy.

“Emerging market currencies are likely to remain pressured by the economic turmoil in Argentina and Turkey, while external factors ranging from global trade tensions and prospects of higher rates could intensify the pain,” cautions Otunuga in an Aug 31 report.

Looking beyond quarterly fluctuations in ST Engineering’s growth story

SINGAPORE (Nov 17): ST Engineering’s latest third-quarter results have shown improvements in profitability in three of its four key business units of aerospace, electronics, land systems and marine. In addition to the main four, there is an “others” unit, which lumps together shared services, new ventures and other related activities. It reported a loss of $7.3 million. ST Engineering’s latest third-quarter results have shown improvements in profitability in almost all its business units. The marine unit, on the other hand, suffered a 35% y-o-y drop in earnings to $12.8 millio....

iFAST founder Lim confident China business will be exciting

SINGAPORE (Nov 16): Lim Chung Chun, chairman and CEO of iFAST Corp, believes long-term diversification is the best strategy to grow its assets under administration (AUA). Indeed, the company’s AUA has grown 18.7% y-o-y to hit a new record high of $8.5 billion as at Sept 30. Although the expansion of its unit trust platform into a wealth management solution distributing stocks, bonds, exchange-traded funds (ETFs) and insurance has been pretty successful, its geographical expansion into the mainland Chinese market for his B2B wealth management solutions hasn’t quite hit its marks yet. ....

How IoT in agriculture could present new opportunities for investors

SINGAPORE (Nov 16): Earlier this year, Avarga, formerly known as UPP Holdings, said it was acquiring a 23.08% stake in local start-up Archisen for up to $1.5 million in three separate tranches. Ian Tong, Avarga’s executive director, is on ­Archisen’s board. Tong is also the executive director of The Edge Media Group, which publishes The Edge Singapore. While indoor farming is not new, high-tech IoT-enabled farm Archisen is drawing on technical expertise from its partners to improve tis production within a controlled environment, shielded from the vagaries of weather that have t....
BMW charges up an 'electrified future'

Christopher Wehner, managing director of BMW Group Asia, explains how electric cars such as the BMW